Dell Shares Are Increasing, But Is It All Good News?

Shares of Dell have increased about 13 percent the past two weeks in advance of the company's first fiscal quarter earnings announcement Thursday, but the news isn't all good these days for Dell.

Analysts are expecting Dell Inc. to report 7 percent revenue growth with flat earnings for its first fiscal quarter when the company releases its 1Q financials after market close Thursday.

The Round Rock, Texas-based company is in line to report earnings of 34 cents per share on $15.7 billion in revenue, according to Thomson Financial First Call. The results likely will generate the first public statements from Dell since it was found by a New York Supreme Court judge on Tuesday to have engaged in fraud, false advertising and deceptive business practices in the state.

Thus far, the company has only issued a statement: "We don't agree with the decision and will be defending our position vigorously. We're confident that when the proceedings are completed, the court will determine that only a relatively small number of customers have been affected."

Stockholders haven't taken much notice of the judge's ruling as shares closed Wednesday at $21.69, their highest close since the first week of January.

Brian Alexander, managing director of equity research, technology hardware/distribution/EMS at Raymond JamesAssociates, believes the increase in Dell shares over the last two weeks can be attributed to "shareholder rotation out of Hewlett-Packard" after that company announced its EDS acquisition.

"In fact, shares had been stagnant following solid PC unit data and the company's analyst day until that transaction was announced. From our perspective, little has changed with regard to the turnaround story, and investor sentiment generally remains cautious with little evidence that an inflection point is at hand," Alexander wrote in a research note. "That said, we think the opportunity for long-term margin improvement is substantial."

Doron Kempel says selling hyper-convergence can be challenging for solution providers, but success will come from taking business from competitors that are unprepared or hesitant to embrace the technology.